Attachment 1 - Resolutions PacketAnnual Conference
Resolutions Packet
2021 Annual Conference Resolutions
September 22 - 24, 2021
ATTACHMENT 1
INFORMATION AND PROCEDURES
RESOLUTIONS CONTAINED IN THIS PACKET: The League of California Cities (Cal
Cities) bylaws provide that resolutions shall be referred by the president to an
appropriate policy committee for review and recommendation. Resolutions with
committee recommendations shall then be considered by the General
Resolutions Committee at the Annual Conference.
This year, two resolutions have been introduced for consideration at the Annual
Conference and referred to Cal Cities policy committees.
POLICY COMMITTEES: Three policy committees will meet virtually one week prior to
the Annual Conference to consider and take action on the resolutions. The sponsors
of the resolutions have been notified of the time and location of the meetings.
GENERAL RESOLUTIONS COMMITTEE: This committee will meet at 1:00 p.m. on
Thursday, September 23, to consider the reports of the policy committees regarding
the resolutions. This committee includes one representative from each of Cal Cities
regional divisions, functional departments, and standing policy committees, as well
as other individuals appointed by the Cal Cities president. Please check in at the
registration desk for room location.
CLOSING LUNCHEON AND GENERAL ASSEMBLY: This meeting will be held at 12:30
p.m. on Friday, September 24, at the SAFE Credit Union Convention Center.
PETITIONED RESOLUTIONS: For those issues that develop after the normal 60-day
deadline, a petition resolution may be introduced at the Annual Conference
with a petition signed by designated voting delegates of 10 percent of all
member cities (48 valid signatures required) and presented to the Voting
Delegates Desk at least 24 hours prior to the time set for convening the Closing
Luncheon & General Assembly. This year, that deadline is 12:30 p.m., Thursday,
September 23. Resolutions can be viewed on Cal Cities Web site:
www.cacities.org/resolutions.
Any questions concerning the resolutions procedures may be directed to Meg
Desmond mdesmond@calcities.org.
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GUIDELINES FOR ANNUAL CONFERENCE RESOLUTIONS
Policy development is a vital and ongoing process within Cal Cities. The principal
means for deciding policy on the important issues facing cities is through Cal Cities
seven standing policy committees and the board of directors. The process allows
for timely consideration of issues in a changing environment and assures city
officials the opportunity to both initiate and influence policy decisions.
Annual conference resolutions constitute an additional way to develop Cal Cities
policy. Resolutions should adhere to the following criteria.
Guidelines for Annual Conference Resolutions
1.Only issues that have a direct bearing on municipal affairs should be
considered or adopted at the Annual Conference.
2.The issue is not of a purely local or regional concern.
3.The recommended policy should not simply restate existing Cal Cities policy.
4.The resolution should be directed at achieving one of the following
objectives:
(a)Focus public or media attention on an issue of major importance to
cities.
(b)Establish a new direction for Cal Cities policy by establishing general
principals around which more detailed policies may be developed by
policy committees and the board of directors.
(c)Consider important issues not adequately addressed by the policy
committees and board of directors.
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KEY TO ACTIONS TAKEN ON RESOLUTIONS
Resolutions have been grouped by policy committees to which they have been
assigned.
Number Key Word Index Reviewing Body Action
1 2 3
1 - Policy Committee Recommendation
to General Resolutions Committee
2 - General Resolutions Committee
3 - General Assembly
HOUSING, COMMUNITY & ECONOMIC DEVELOPMENT POLICY COMMITTEE
1 2 3
2 Securing Railroad Property Maintenance
REVENUE & TAXATION POLICY COMMITTEE
1 2 3
1 Online Sales Tax Equity
TRANSPORTATION, COMMUNICATION & PUBLIC WORKS POLICY COMMITTEE
1 2 3
2 Securing Railroad Property Maintenance
3
KEY TO ACTIONS TAKEN ON RESOLUTIONS (Continued)
Resolutions have been grouped by policy committees to which they have been
assigned.
KEY TO REVIEWING BODIES KEY TO ACTIONS TAKEN
1. Policy Committee
A Approve
2. General Resolutions Committee
D Disapprove
3. General Assembly N No Action
R Refer to appropriate policy
committee for study ACTION FOOTNOTES
a Amend+
* Subject matter covered in another resolution
Aa Approve as amended+
** Existing League policy Aaa Approve with additional
amendment(s)+
*** Local authority presently exists
Ra Refer as amended to appropriate
policy committee for study+
Raa Additional amendments and refer+
Da Amend (for clarity or brevity) and
Disapprove+
Na Amend (for clarity or brevity) and
take No Action+
W Withdrawn by Sponsor
Procedural Note:
The League of California Cities resolution process at the Annual Conference is guided
by the Cal Cities Bylaws.
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1.RESOLUTION OF THE LEAGUE OF CALIFORNIA CITIES (“CAL CITIES”) CALLING ONTHE STATE LEGISLATURE TO PASS LEGISLATION THAT PROVIDES FOR A FAIRAND EQUITABLE DISTRIBUTION OF THE BRADLEY BURNS 1% LOCAL SALES TAXFROM IN-STATE ONLINE PURCHASES, BASED ON DATA WHERE PRODUCTS ARESHIPPED TO, AND THAT RIGHTFULLY TAKES INTO CONSIDERATION THE IMPACTSTHAT FULFILLMENT CENTERS HAVE ON HOST CITIES BUT ALSO PROVIDES A FAIRSHARE TO CALIFORNIA CITIES THAT DO NOT AND/OR CANNOT HAVE AFULFILLMENT CENTER WITHIN THEIR JURISDICTION
Source: City of Rancho Cucamonga Concurrence of five or more cities/city officials: Cities: Town of Apple Valley; City of El Cerrito; City of La Canada Flintridge; City of La Verne; City of Lakewood; City of Moorpark; City of Placentia; City of Sacramento Referred to: Revenue and Taxation Policy Committee
WHEREAS, the 2018 U.S. Supreme Court decision in Wayfair v. South Dakota clarified that states could charge and collect tax on purchases even if the seller does not have a physical presence in the state; and
WHEREAS, California cities and counties collect 1% in Bradley Burns sales and use tax from the purchase of tangible personal property and rely on this revenue to provide critical public services such as police and fire protection; and
WHEREAS, in terms of “siting” the place of sale and determining which jurisdiction receives the 1% Bradley Burns local taxes for online sales, the California Department of Tax and Fee Administration (CDTFA) determines “out-of-state” online retailers as those with no presence in California that ship property from outside the state and are therefore subject to use tax, not sales tax, which is collected in a countywide pool of the jurisdiction where the property is shipped from; and
WHEREAS, for online retailers that have a presence in California and have a stock of goods in the state from which it fulfills orders, CDTFA considers the place of sale (“situs”) as the location from which the goods were shipped such as a fulfillment center; and
WHEREAS, in early 2021, one of the state’s largest online retailers shifted its ownership structure so that it is now considered both an in-state and out-of-state retailer, resulting in the
sales tax this retailer generates from in-state sales now being entirely allocated to the specific city where the warehouse fulfillment center is located as opposed to going into a countywide pool that is shared with all jurisdictions in that County, as was done previously; and
WHEREAS, this all-or-nothing change for the allocation of in-state sales tax has created winners and losers amongst cities as the online sales tax revenue from the retailer that was
once spread amongst all cities in countywide pools is now concentrated in select cities that host a fulfillment center; and
WHEREAS, this has created a tremendous inequity amongst cities, in particular for cities that are built out, do not have space for siting a 1 million square foot fulfillment center, are not located along a major travel corridor, or otherwise not ideally suited to host a fulfillment center; and
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WHEREAS, this inequity affects cities statewide, but in particular those with specific circumstances such as no/low property tax cities that are extremely reliant on sales tax revenue
as well as cities struggling to meet their RHNA obligations that are being compelled by the State to rezone precious commercial parcels to residential; and
WHEREAS, the inequity produced by allocating in-state online sales tax revenue exclusively to cities with fulfillment centers is exasperated even more by, in addition to already reducing the amount of revenue going into the countywide pools, the cities with fulfillment centers are also receiving a larger share of the dwindling countywide pool as it is allocated based on cities’ proportional share of sales tax collected; and
WHEREAS, while it is important to acknowledge that those cities that have fulfillment centers experience impacts from these activities and deserve equitable supplementary compensation, it should also be recognized that the neighboring cities whose residents are ordering product from that center now receive no revenue from the center’s sales activity despite also experiencing the impacts created by the center, such as increased traffic and air
pollution; and
WHEREAS, the COVID-19 pandemic greatly accelerated the public’s shift towards
online purchases, a trend that is unlikely to be reversed to pre-pandemic levels; and
NOW, THEREFORE, BE IT RESOLVED that Cal Cities calls on the State Legislature to
pass legislation that provides for a fair and equitable distribution of the Bradley Burns 1% local sales tax from in-state online purchases, based on data where products are shipped to, and that rightfully takes into consideration the impacts that fulfillment centers have on host cities but also provides a fair share to California cities that do not and/or cannot have a fulfillment center within their jurisdiction.
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Background Information to Resolution
Source: City of Rancho Cucamonga
Background:
Sales tax is a major revenue source for most California cities. Commonly known as the local 1% Bradley-Burns tax, since the 1950’s, cities have traditionally received 1 cent on every dollar of a sale made at the store, restaurant, car dealer, or other location within a jurisdiction’s boundaries.
Over the years, however, this simple tax structure has evolved into a much more complex set of laws and allocation rules. Many of these rules relate to whether or not a given transaction is subject to sales tax, or to use tax – both have the same 1% value, but each applies in separate circumstances. The California Department of Tax and Fee Administration (CDTFA) is responsible for administering this system and issuing rules regarding how it is applied in our state.
The following chart created by HdL Companies, the leading provider of California sales tax consulting, illustrates the complex structure of how sales and use tax allocation is done in
California, depending on where the transaction starts, where the goods are located, and how the customer receives the goods:
With the exponential growth of online sales and the corresponding lack of growth, and even
decline, of shopping at brick and mortar locations, cities are seeing much of their sales tax
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growth coming from the countywide sales tax pools, since much of the sales tax is now funneled to the pools.
Recently, one of the world’s largest online retailers changed the legal ownership of its fulfillment centers. Instead of having its fulfillment centers owned and operated by a third-party vendor,
they are now directly owned by the company. This subtle change has major impacts to how the 1% local tax is allocated. Following the chart above, previously much of the sales tax would have followed the green boxes on the chart and been allocated to the countywide pool based on point of delivery. Now, much of the tax is following the blue path through the chart and is allocated to the jurisdiction in which the fulfillment center is located. (It should be noted that some of the tax is still flowing to the pools, in those situations where the fulfillment center is shipping goods for another seller that is out of state.) This change has created a situation where most cities in California – more than 90%, in fact – are experiencing a sales tax revenue loss that began in the fourth quarter of calendar year 2021. Many cities may not be aware of this impact, as the fluctuations in sales tax following the
pandemic shutdowns have masked the issue. But this change will have long-term impacts on revenues for all California cities as all these revenues benefiting all cities have shifted to just a handful of cities and counties that are home to this retailer’s fulfillment centers.
This has brought to light again the need to address the issues in how sales and use taxes are distributed in the 21st century. Many, if not most cities will never have the opportunity have a
warehouse fulfillment center due to lack of space or not being situated along a major travel corridor. These policies especially favor retailers who may leverage current policy in order to negotiate favorable sales tax sharing agreements, providing more money back to the retailer at
the expense of funding critical public services. With that stated, it is important to note the many impacts to the jurisdictions home to the fulfillment centers. These centers do support the ecommerce most of us as individuals have come to rely on, including heavy wear and tear on streets – one truck is equal to about 8,000 cars when it comes to impact on pavement – and increased air pollution due to the truck traffic and idling diesel engines dropping off large loads. However, it is equally important that State policies acknowledge that entities without fulfillment centers also experience impacts from ecommerce and increased deliveries. Cities whose residents are ordering products that are delivered to their doorstep also experience impacts from traffic, air quality and compromised safety, as well as the negative impact on brick-and-mortar businesses struggling to compete
with the sharp increase in online shopping. These cities are rightfully entitled to compensation in an equitable share of sales and use tax. We do not believe that online sales tax distribution between fulfillment center cities and other cities should be an all or nothing endeavor, and not
necessarily a fifty-fifty split, either. But we need to find an equitable split that balances the impacts to each jurisdiction involved in the distribution of products purchased online.
Over the years, Cal Cities has had numerous discussions about the issues surrounding sales tax in the modern era, and how state law and policy should be revisited to address these issues. It is a heavy lift, as all of our cities are impacted a bit differently, making consensus difficult. We believe that by once again starting the conversation and moving toward the development of laws and policies that can result in seeing all cities benefit from the growth taxes generated through online sales, our state will be stronger. It is for these reasons, that we should all aspire to develop an equitable sales tax distribution for online sales.
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LETTERS OF CONCURRENCE
Resolution No. 1
9
July 19, 2021
Cheryl Viegas Walker, President
League of California Cities
1400 K Street, Suite 400
Sacramento, CA 95814
Dear President Walker:
The Town of Apple Valley strongly supports the City of Rancho Cucamonga’s effort to submit a resolution
for consideration by the General Assembly at Cal Cities 2021 Annual Conference in Sacramento.
Current policies by the California Department of Tax and Fees (CDTFA) require that the one percent Bradley
Burns local tax revenue from in-state online retailers be allocated to the jurisdiction from which the package
was shipped from, as opposed to going into a countywide pool as is the practice with out-of-state online
retailers. Earlier this year, one of the largest online retailers shifted its ownership structure and now operates
as an in-state online retailer as well as out-of-state online retailer. Whereas, all sales tax revenue generated by
this retailer’s sales previously went into a countywide pool and was distributed amongst the jurisdictions in
the pool. Now the revenue from in-state sales goes entirely to the city where the fulfillment center is located,
and the packages shipped from. Cities that do not have a fulfillment center now receive no revenue from this
retailer’s online in-state sales transactions, even when the packages are delivered to locations within the cities’
borders and paid for by residents in those locations. Cities that border jurisdictions with fulfillment centers
also experience its impacts such as increased truck traffic, air pollution and declining road conditions.
This all-or-nothing practice has created clear winners and losers amongst cities as the online sales tax revenue
from large online retailers that was once spread amongst all cities in countywide pools is now concentrated in
select cities fortunate enough to host a fulfillment center. This has created a growing inequity amongst
California cities, which only benefits some and is particularly unfair to cities who have no chance of ever
obtaining a fulfillment center, such as those that are built out or are not situated along major travel corridors.
No/low property tax cities that rely on sales tax revenue are especially impacted as well as cities struggling to
meet their RHNA allocations that are being pressured by Sacramento to rezone precious commercial parcels
to residential.
The current online sales tax distribution policies are inherently unfair and exasperate the divide between the
winners and losers. Ultimately, the real winners may be the retailers, who leverage these policies to negotiate
favorable sales tax sharing agreements from a small group of select cities understandably wanting to host
fulfillment centers. The current online sales tax distribution policies unfairly divide local agencies, exacerbate
already difficult municipal finances, and in the end result in a net loss of local government sales tax proceeds
that simply serve to make private sector businesses even more profitable at the expense of everyone’s residents.
10
We can do better than this. And we should all aspire to develop an equitable sales tax distribution of online
sales that addresses the concerns noted above.
For these reasons, the Town of Apple Valley concurs that the resolution should go before the General
Assembly. If you have any questions regarding the Town’s position in this matter, please do not hesitate to
contact the Town Manager at 760-240-7000 x 7051.
Sincerely,
Curt Emick
Mayor
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July 21, 2021
Cheryl Viegas Walker, President League of California Cities 1400 K Street, Suite 400
Sacramento, CA 95814
RE: Letter of Support for the City of Rancho Cucamonga’s Resolution for Fair and Equitable Distribution of the Bradley Burns 1% Local Sales Tax
Dear President Walker:
The City of El Cerrito supports the City of Rancho Cucamonga’s effort to submit a resolution for consideration by the General Assembly at the Cal Cities 2021 Annual Conference in Sacramento.
Current policies by the California Department of Tax and Fees (CDTFA) require that the 1 percent Bradley Burns local tax revenue from in-state online retailers be allocated to the jurisdiction from which the package was shipped from, as opposed to going into a countywide pool as is the practice with out-of-state online retailers. Earlier this year, one
of the largest online retailers shifted its ownership structure and now operates as an in-
state online retailer as well as out-of-state online retailer. Previously, all sales tax revenue generated by this retailer’s sales went into a countywide pool and was distributed amongst the jurisdictions in the pool; now the revenue from in-state sales goes entirely to the city where the fulfillment center is located and the packages are shipped from. Cities
that do not have a fulfillment center now receive no revenue from this retailer’s online in-
state sales transactions, even when the packages are delivered to locations within the cities’ borders and paid for by residents in those locations. Cities that border jurisdictions with fulfillment centers also experience its impacts such as increased truck traffic, air pollution, and declining road conditions.
This all-or-nothing practice has created clear winners and losers amongst cities as the online sales tax revenue from large online retailers that was once spread amongst all cities in countywide pools is now concentrated in select cities fortunate enough to host a fulfillment center. This has created a growing inequity amongst California cities, which
only benefits some and is particularly unfair to cities such as El Cerrito who have no chance of ever obtaining a fulfillment center as we are a built out, four square mile, small city. Additionally, cities not situated along major travel corridors and no/low property tax cities that rely on sales tax revenue are especially impacted, as well as cities struggling to build much needed affordable housing that may require rezoning commercial parcels
in order to meet their RHNA allocations.
12
The current online sales tax distribution policies are inherently unfair and exasperate the divide between the winners and losers. Ultimately, the real winners may be the retailers, who leverage these policies to negotiate favorable sales tax sharing agreements from a small group of select cities understandably wanting to host fulfillment centers. The current
online sales tax distribution policies serve to divide local agencies, exacerbate already
difficult municipal finances, and in the end results in a net loss of local government sales tax proceeds that simply serve to make private sector businesses even more profitable at the expense of everyone’s residents. We can do better, and we should all aspire to develop an equitable sales tax distribution of online sales that addresses the concerns
noted above.
For these reasons, the City of El Cerrito concurs that the resolution should go before the General Assembly.
Sincerely,
Paul Fadelli, Mayor
City of El Cerrito cc: El Cerrito City Council City of Rancho Cucamonga
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15
CITY HALL
3660 "D" Street. La Verne, California 91750-3599
www.cityof laverne.org
SST€RCIT ES
July 19,2021
Cheryl Viegas Walker, President
League of California Cities
1400 K Street, Suite 400
Sacramento, CA 95814
Dear President Walker:
The City of La Verne strongly supports the City of Rancho Cucamonga's effort to submit
a resolution for consideration by the General Assembly at the League's 2021 Annual
Conference in Sacramento.
Current policies by the California Department of Tax and Fees (CDTFA) require that the
1 percent Bradley Burns local tax revenue from in-state online retailers be allocated to
the jurisdiction from which the package was shipped from, as opposed to going into a
countywide pool as is the practice with oulof-state online retailers. Earlier this year, one
of the largest online retailers shifted its ownership structure and now operates as an in-
state online retailer as well as outof-state online retailer. Whereas all sales tax revenue
generated by this retaileis sales previously went into a countywide pool and was
distributed amongst the jurisdictions in the pool, now the revenue from in-state sales
goes entirely to the city where the fulfillment center is located, and the packages shipped
from. Cities that do not have a fulfillment center now receive no revenue from this
retailer's online in-state sales transactions, even when the packages are delivered to
locations within the cities'borders and paid for by residents in those locations. cities
that border jurisdictions with fulfillment centers also experience its impacts such as
increased truck traffic, air pollution, and declining road conditions.
This all-or-nothing practice has created clear winners and losers amongst cities as the
online sales tax revenue from large online retailers that was once spread amongst all
cities in countywide pools is now concentrated in select cities fortunate enough to host a
fulfillment center. This has created a growing inequity amongst california cities, which
only benefits some and is particularly unfair to cities which have no chance of ever
obtaining a futfillment center, Such as those that are built out or are not situated along
major travel corridors. No/low property tax cities that rely on sales tax revenue are
General Administration 909/596-8726 . Water Customer Service 909/596-8744 . Community Services 90S/596'8700
Public Works 909/596-8741 . Finance 909/596-8716 . Community Development 909/596'8706 . Building 909/596-8713
P0lice Depanment 909/596-1913 r Fire Department 909/596-5991 . Gene.al Fax 909/596-8737
Crrv or LaVBRNE
16
July 19,2021
Re: Online Sales Tax Equity Support
Page 2
especially impacted as well as cities struggling to meet their RHNA allocations that are
being pressured by Sacramento to rezone precious commercial parcels to residential.
The cunent online sales tax distribution policies are inherently unfair and exacerbate the
divide between the winners and losers. Ultimately, the real winners may be the retailers,
who leverage these policies to negotiate favorable sales tax sharing agreements from a
small group of select cities understandably wanting to host fulfillment centers. The
current online sales tax distribution policies unfairiy divide local agencies, exacerbate
already difficult municipal finances, and in the end, result in a net loss of local
government sales tax proceeds that simply serve to make private sector businesses
even more profitable at the expense of everyone's residents. We can do better than
this. And we should all aspire to develop an equitabte sales tax distribution of online
sales that addresses the concerns noted above.
For these reasons, the city of La Verne concurs that the resolution should go before the
General Assembly.
Sincerely,
Bob Russi
City Manager
City of La Verne
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CITY OF MOORPARK
JANICE S. PARVIN
Mayor
DR. ANTONIO CASTRO
Councilmember
CHRIS ENEGREN
Councilmember
DANIEL GROFF
Councilmember
DAVID POLLOCK
Councilmember
799 Moorpark Avenue, Moorpark, California 93021
Main City Phone Number (805) 517-6200 | Fax (805) 532-2205 | moorpark@moorparkca.gov
July 14, 2021 TRANSMITTED ELECTRONICALLY
Cheryl Viegas-Walker, President
League of California Cities
1400 K Street, Suite 400
Sacramento, CA 95814
Dear President Walker:
The City of Moorpark strongly supports the City of Rancho Cucamonga’s effort to submit a
resolution for consideration by the General Assembly at the League’s 2021 Annual
Conference in Sacramento.
Current policies of the California Department of Tax and Fees (CDTFA) require that the one
percent Bradley Burns local tax revenue from in-state online retailers be allocated to the
jurisdiction from which the package was shipped, as opposed to going into a countywide pool
as is the practice with out-of-state online retailers. Earlier this year, one of the largest online
retailers shifted its ownership structure and now operates both as an in-state online retailer
and as an out-of-state online retailer. Whereas all sales tax revenues generated by this
retailer’s sales previously went into countywide pools and were distributed amongst the
jurisdictions in the pool, sales tax revenues from in-state sales now go entirely to the city
where the fulfillment center is located and the package is shipped from. Cities that do not
have a fulfillment center now receive no sales tax revenue from this retailer’s online in-state
sales transactions, even when the packages are delivered to locations within the cities’
borders and paid for by residents in those locations. Cities that border jurisdictions with
fulfillment centers also experience its impacts such as increased truck traffic, air pollution,
and deteriorating road conditions.
This all-or-nothing practice has created clear winners and losers amongst cities as the online
sales tax revenues from large online retailers that were once spread amongst all cities in
countywide pools are now concentrated in select cities fortunate enough to host a fulfillment
center. This has created a growing inequity amongst California cities, which only benefits
some and is particularly unfair to cities who have no chance of ever obtaining a fulfillment
center, such as those that are built out or are not situated along major travel corridors.
No/low property tax cities that rely on sales tax revenue are especially impacted, as well as
19
Letter of Support
Page 2
cities struggling to meet their RHNA allocations that are being pressured by Sacramento to
rezone limited commercial properties for residential land uses.
The current online sales tax distribution policies are inherently unfair and exasperate the
divide between the winners and losers. Ultimately, the real winners may be the retailers, who
leverage these policies to negotiate favorable sales tax sharing agreements from a small
group of select cities understandably wanting to host fulfillment centers. The current online
sales tax distribution policies unfairly divide local agencies, exacerbate already difficult
municipal finances, and ultimately result in a net loss of local government sales tax proceeds
that simply serve to make private sector businesses more profitable at the expense of
everyone’s residents. We can do better than this, and we should all aspire to develop an
equitable sales tax distribution of online sales that addresses the concerns noted above.
For these reasons, the City of Moorpark concurs that the resolution should go before the
General Assembly at the 2021 Annual Conference in Sacramento.
Sincerely,
Janice S. Parvin
Mayor
cc: City Council
City Manager
20
*****
The People are the City
Mayor
CRAIG S. GREEN
Mayor Pro Tem
CHAD P. WANKE
Councilmembers:
RHONDA SHADER
WARD L. SMITH
JEREMY B. YAMAGUCHI
City Clerk:
ROBERT S. MCKINNELL
City Treasurer
KEVIN A. LARSON
City Administrator
DAMIEN R, ARRULA
401 East Chapman Avenue - Placentia, California 92870
July 14,2021
Cheryl Viegas Walker, President
League of California Cities
1400 K Street, Suite 400
Sacramento, CA 95814
Dear President Walker:
The City of Placentia strongly supports the City of Rancho Cucamonga's effort to submit
a resolution for consideration by the General Assembly at the League's 2021 Annual
Conference in Sacramento.
Current policies by the California Department of Tax and Fees (CDTFA) require that the
1 percent (1%) Bradley Burns local tax revenue from in-state online retailers be allocated
to the jurisdiction from which the package was shipped from, as opposed to going into a
countywide pool as is the practice with out-of-state online retailers. Earlier this year, one
of the largest online retailers shifted its ownership structure and now operates as an in-
state online retailer as well as out-of-state online retailer. Whereas, all sales tax revenue
generated by this retailer's sales previously went into a countywide pool and was
distributed amongst the jurisdictions in the pool, now the revenue from in-state sales goes
entirely to the city where the fulfillment center is located, and the packages shipped from.
Cities that do not have a fulfillment center now receive no revenue from this retailer's
online in-state sales transactions, even when the packages are delivered to locations
within the cities' borders and paid for by residents in those locations. Cities that border
jurisdictions with fulfillment centers also experience its impacts such as increased truck
traffic, air pollution and declining road conditions.
This all-or-nothing practice has created clear winners and losers amongst cities as the
online sales tax revenue from large online retailers that was once spread amongst all
cities in countywide pools is now concentrated in select cities fortunate enough to host a
fulfillment center. This has created a growing inequity amongst California cities, which
only benefits some and is particularly unfair to cities who have no chance of ever obtaining
a fulfillment center, such as those that are built out or are not situated along major travel
corridors. No/low property tax cities that rely on sales tax revenue are especially impacted
as well as cities struggling to meet their RHNA allocations that are being pressured by
Sacramento to rezone precious commercial parcels to residential.
The current onfine sales tax distribution policies are inherently unfair and exasperate the
divide between the winners and losers. Ultimately, the real winners may be the retailers,
who leverage these policies to negotiate favorable sales tax sharing agreements from a
small group of select cities understandably wanting to host fulfillment centers. The21
Letter of Support: City of Rancho Cucamonga
July 14,2021
Page2 of 2
current onl¡ne sales tax distribution policies unfairly divide local agencies, exacerbate
already difficult municipal finances, and in the end result in a net loss of local government
sales tax proceeds that simply serve to make private sector businesses even more
profitable at the expense of everyone's residents. We can do better than this. And we
should all aspire to develop an equitable sales tax distribution of online sales that
addresses the concerns noted above.
For these reasons, the City of Placentia concurs that the resolution should go before the
General Assembly. Should you have any questions regarding this letter, please contact
me at (714) 993-8117 or via email at administration@placentia.oro.
Sincerely,
Damien R. Arrula
City Administrator
22
23
24
League of California Cities Staff Analysis on Resolution No. 1
Staff: Nicholas Romo, Legislative Affairs, Lobbyist
Committee: Revenue and Taxation
Summary: This Resolution calls on the League of California Cities (Cal Cities) to request the
Legislature to pass legislation that provides for a fair and equitable distribution of the
Bradley Burns 1% local sales tax from in-state online purchases, based on data where products are shipped to, and that rightfully takes into consideration the impacts that fulfillment centers have on host cities but also provides a fair share to California cities that do not and/or cannot have a fulfillment center within their jurisdiction.
Background: The City of Rancho Cucamonga is sponsoring this resolution to “address the issues in
how sales and use taxes are distributed in the 21st century.”
The City notes that “sales tax is a major revenue source for most California cities.
Commonly known as the local 1% Bradley-Burns tax, since the 1950’s, cities have
traditionally received 1 cent on every dollar of a sale made at the store, restaurant, car
dealer, or other location within a jurisdiction’s boundaries. Over the years, however, this simple tax structure has evolved into a much more complex set of laws and allocation
rules. Many of these rules relate to whether or not a given transaction is subject to
sales tax, or to use tax – both have the same 1% value, but each applies in separate
circumstances.
Recently, one of the world’s largest online retailers changed the legal ownership of its
fulfillment centers. Instead of having its fulfillment centers owned and operated by a
third-party vendor, they are now directly owned by the company. This subtle change
has major impacts to how the 1% local tax is allocated.
This change has created a situation where most cities in California – more than 90%, in
fact – are experiencing a sales tax revenue loss that began in the fourth quarter of
calendar year 2021. Many cities may not be aware of this impact, as the fluctuations in
sales tax following the pandemic shutdowns have masked the issue. But this change
will have long-term impacts on revenues for all California cities as all these revenues benefiting all cities have shifted to just a handful of cities and counties that are home to
this retailer’s fulfillment centers.”
The City’s resolution calls for action on an unspecified solution that “rightfully takes into
consideration the impacts that fulfillment centers have on host cities but also provides a fair share to California cities that do not and/or cannot have a fulfillment center within
their jurisdiction,” which aims to acknowledge the actions taken by cities to alleviate poverty, catalyze economic development, and improve financial stability within their communities through existing tax sharing and zoning powers.
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Ultimately, sponsoring cities believe “that by once again starting the conversation and
moving toward the development of laws and policies that can result in seeing all cities benefit from the growth taxes generated through online sales, our state will be stronger.”
Sales and Use Tax in California The Bradley-Burns Uniform Sales Tax Act allows all local agencies to apply its own sales and use tax on the same base of tangible personal property (taxable goods). This tax rate currently is fixed at 1.25% of the sales price of taxable goods sold at retail
locations in a local jurisdiction, or purchased outside the jurisdiction for use within the
jurisdiction. Cities and counties use this 1% of the tax to support general operations, while the remaining 0.25% is used for county transportation purposes.
In California, all cities and counties impose Bradley-Burns sales taxes. California
imposes the sales tax on every retailer engaged in business in this state that sells
taxable goods. The law requires businesses to collect the appropriate tax from the purchaser and remit the amount to the California Department of Tax and Fee Administration (CDTFA). Sales tax applies whenever a retail sale is made, which is basically any sale other than one for resale in the regular course of business. Unless
the person pays the sales tax to the retailer, they are liable for the use tax, which is
imposed on any person consuming taxable goods in the state. The use tax rate is the same rate as the sales tax rate.
Generally, CDTFA distributes Bradley‑Burns tax revenue based on where a sale took place, known as a situs‑based system. A retailer’s physical place of business—such as a retail store or restaurant—is generally the place of sale. “Sourcing” is the term used by
tax practitioners to describe the rules used to determine the place of sale, and therefore,
which tax rates are applied to a given purchase and which jurisdictions are entitled to the local and district taxes generated from a particular transaction.
California is primarily an origin-based sourcing state – meaning tax revenues go to the
jurisdiction in which a transaction physically occurs if that can be determined. However,
California also uses a form of destination sourcing for the local use tax and for district taxes (also known as “transactions and use taxes” or “add-on sale and use taxes”). That is, for cities with local add-on taxes, they receive their add-on rate amount from remote and online transactions.
Generally, allocations are based on the following rules:
•The sale is sourced to the place of business of the seller - whether the product isreceived by the purchaser at the seller’s business location or not.
•If the retailer maintains inventory in California and has no other in state location,the source is the jurisdiction where the warehouse is situated. This resolution is
concerned with the growing amount of online retail activity being sourced to cities
with warehouse/fulfillment center locations.
•If the business’ sales office is located in California but the merchandise isshipped from out of state, the tax from transactions under $500,000 is allocated
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via the county pools. The tax from transactions over $500,000 is allocated to the jurisdiction where the merchandise is delivered.
•When a sale cannot be identified with a permanent place of business in the state,
the sale is sourced to the allocation pool of the county where the merchandisewas delivered and then distributed among all jurisdictions in that county inproportion to ratio of sales. For many large online retailers, this has been thetraditional path.
Online Sales and Countywide Pools While the growth of e-commerce has been occurring for more than two decades, led by some of the largest and most popular retailers in the world, the dramatic increase in online shopping during the COVID-19 pandemic has provided significant revenue to
California cities as well as a clearer picture on which governments enjoy even greater
benefits.
In the backdrop of booming internet sales has been the steady decline of brick-and-mortar retail and shopping malls. For cities with heavy reliance on in-person retail
shopping, the value of the current allocation system has been diminished as their
residents prefer to shop online or are incentivized to do so by retailers (during the COVID-19 pandemic, consumers have had no other option but to shop online for certain goods). All the while, the demands and costs of city services continue to grow for cities across the state.
As noted above, the allocation of sales tax revenue to local governments depends on the location of the transaction (or where the location is ultimately determined). For in-person retail, the sales tax goes to the city in which the product and store are located - a customer purchasing at a register. For online sales, the Bradley Burns sales tax
generally goes to a location other than the one where the customer lives – either to the city or county where an in-state warehouse or fulfillment center is located, the location of in-state sales office (ex. headquarters) or shared as use tax proceeds amongst all local governments within a county based on their proportionate share of taxable sales.
Under current CDTFA regulations, a substantial portion of local use tax collections are allocated through a countywide pool to the local jurisdictions in the county where the property is put to its first functional use. The state and county pools constitute over 15% of local sales and use tax revenues. Under the pool system, the tax is reported by the taxpayer to the countywide pool of use and then distributed to each jurisdiction in that
county on a pro-rata share of taxable sales. If the county of use cannot be identified, the revenues are distributed to the state pool for pro-rata distribution on a statewide basis.
Concentration of Online Sales Tax Revenue and Modernization
Sales tax modernization has been a policy goal of federal, state, and local government
leaders for decades to meet the rapidly changing landscape of commercial activity and ensure that all communities can sustainably provide critical services.
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For as long as remote and internet shopping has existed, policy makers have been concerned about their potential to disrupt sales and use tax allocation procedures that underpin the funding of local government services. The system was designed in the
early twentieth century to ensure that customers were paying sales taxes to support
local government services within the community where the transactions occurred whether they resided there or not. This structure provides benefit to and recoupment for the public resources necessary to ensure the health and safety of the community broadly.
City leaders have for as long been concerned about the loosening of the nexus between what their residents purchase and the revenues they receive. Growing online shopping, under existing sourcing rules, has led to a growing concentration of sales tax revenue being distributed to a smaller number of cities and counties. As more medium and large
online retailers take title to fulfillment centers or determine specific sales locations in
California as a result of tax sharing agreements in specific cities, online sales tax revenue will be ever more concentrated in a few cities at the control of these companies. Furthermore, local governments are already experiencing the declining power of the sales tax to support services as more money is being spent on non-taxable
goods and services.
For more on sales and use tax sourcing please see Attachment A.
State Auditor Recommendations
In 2017, the California State Auditor issued a report titled, “The Bradley-Burns Tax and
Local Transportation Funds, noting that:
“Retailers generally allocate Bradley Burns tax revenue based on the place of sale, which they identify according to their business structure. However, retailers that make
sales over the Internet may allocate sales to various locations, including their
warehouses, distribution center, or sales offices. This approach tends to concentrate
Bradley Burns tax revenue into the warehouses’ or sales offices’ respective
jurisdictions. Consequently, counties with a relatively large amount of industrial space may receive disproportionately larger amounts of Bradley Burns tax, and therefore Local
Transportation Fund, revenue.
The State could make its distribution of Bradley Burns tax revenue derived from online
sales more equitable if it based allocations of the tax on the destinations to which goods are shipped rather than on place of sale.”
The Auditor’s report makes the following recommendation:
“To ensure that Bradley‑Burns tax revenue is more evenly distributed, the Legislature
should amend the Bradley‑Burns tax law to allocate revenues from Internet sales based
on the destination of sold goods rather than their place of sale.”
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In acknowledgement of the growing attention from outside groups on this issue, Cal Cities has been engaged in its own study and convening of city officials to ensure pursued solutions account for the circumstances of all cities and local control is best
protected. These efforts are explored in subsequent sections.
Cal Cities Revenue and Taxation Committee and City Manager Working Group In 2015 and 2016, Cal Cities’ Revenue and Taxation Policy Committee held extensive discussions on potential modernization of tax policy affecting cities, with a special
emphasis on the sales tax. The issues had been identified by Cal Cities leadership as a
strategic priority given concerns in the membership about the eroding sales tax base and the desire for Cal Cities to take a leadership role in addressing the associated issues. The policy committee ultimately adopted a series of policies that were approved by the Cal Cities board of directors. Among its changes were a recommended change
to existing sales tax sourcing (determining where a sale occurs) rules, so that the point
of sale (situs) is where the customer receives the product. The policy also clarifies that specific proposals in this area should be carefully reviewed so that the impacts of any changes are fully understood. See “Existing Cal Cities Policy” section below.
Cal Cities City Manager Sales Tax Working Group Recommendations
In the Fall of 2017, the Cal Cities City Managers Department convened a working group (Group) of city managers representing a diverse array of cities to review and consider options for addressing issues affecting the local sales tax.
The working group of city managers helped Cal Cities identify internal common ground
on rapidly evolving e-commerce trends and their effects on the allocation of local sales and use tax revenue. After meeting extensively throughout 2018, the Group made several recommendations that were endorsed unanimously by Cal Cities’ Revenue and Taxation Committee at its January, 2019 meeting and by the board of directors at its
subsequent meeting.
The Group recommended the following actions in response to the evolving issues associated with e-commerce and sales and use tax:
Further Limiting Rebate Agreements: The consensus of the Group was that:
•Sales tax rebate agreements involving online retailers should be prohibited going
forward. They are inappropriate because they have the effect of encouraging
revenue to be shifted away from numerous communities and concentrated to the
benefit of one.
•Any type of agreement that seeks to lure a retailer from one community toanother within a market area should also be prohibited going forward. Existinglaw already prohibits such agreements for auto dealers and big box stores.
Shift Use Tax from Online Sales, including from the South Dakota v. Wayfair Decision Out of County Pools: The Group’s recommendation is based first on the principle of “situs” and that revenue should be allocated to the jurisdiction where the use occurs. Each city and county in California imposed a Bradley Burns sales and use tax rate
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under state law in the 1950s. The use tax on a transaction is the rate imposed where the purchaser resides (the destination). These use tax dollars, including new revenue from the South Dakota v. Wayfair decision, should be allocated to the destination
jurisdiction whose Bradley Burns tax applies and not throughout the entire county.
•Shift of these revenues, from purchases from out of state retailers includingtransactions captured by the South Dakota v. Wayfair decision, out of countypools to full destination allocation on and after January 1, 2020.
•Allow more direct reporting of use taxes related to construction projects tojurisdiction where the construction activity is located by reducing existingregulatory threshold from $5 million to $100,000.
Request/Require CDTFA Analysis on Impacts of Sales Tax Destination Shifts: After discussion of numerous phase-in options for destination sourcing and allocation for sales taxes, the Group ultimately decided that a more complete analysis was needed to sufficiently determine impacts. Since the two companies most cities rely on for sales tax analysis, HdL and MuniServices, were constrained to modeling with transaction and
use tax (district tax) data, concerns centered on the problem of making decisions without adequate information. Since the CDTFA administers the allocation of local sales and use taxes, it is in the best position to produce an analysis that examines:
•The impacts on individual agencies of a change in sourcing rules. This would
likely be accomplished by developing a model to examine 100% destination
sourcing with a report to the Legislature in early 2020.
•The model should also attempt to distinguish between business-to-consumertransactions versus business-to-business transactions.
•The model should analyze the current number and financial effects of city andcounty sales tax rebate agreements with online retailers and how destinationsourcing might affect revenues under these agreements.
Conditions for considering a Constitutional Amendment that moves toward destination allocation: Absent better data on the impacts on individual agencies associated with a shift to destination allocation of sales taxes from CDTFA, the Group declined to prescribe if/how a transition to destination would be accomplished; the sentiment was that the issue was better revisited once better data was available. In anticipation that
the data would reveal significant negative impacts on some agencies, the Group desired that any such shift should be accompanied by legislation broadening of the base of sales taxes, including as supported by existing Cal Cities policy including:
•Broadening the tax base on goods, which includes reviewing existing exemptions
on certain goods and expanding to digital forms of goods that are otherwise
taxed; and
•Expanding the sales tax base to services, such as those commonly taxed inother states.
This Resolution builds upon previous work that accounts for the impacts that distribution networks have on host cities and further calls on the organization to advocate for changes to sales tax distribution rules.
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The Resolution places further demands on data collected by CDTFA to establish a “fair and equitable distribution of the Bradley Burns 1% local sales tax from in-state online purchases.” Such data is proposed to be collected by SB 792 (Glazer, 2021). More
discussion on this topic can be found in the “Staff Comments” section.
Staff Comments: Proposed Resolution Affixes Equity Based, Data Driven Approach to Existing Cal Cities Policy on Sales Tax Sourcing
The actions resulting from this resolution, if approved, would align with existing policy
and efforts to-date to modernize sales tax rules. While not formalized in existing Cal Cities policy or recommendations, city managers and tax practitioners generally have favored proposals that establish a sharing of online sales tax revenues rather than a full destination shift. City leaders and practitioners across the state have acknowledged
during Cal Cities Revenue and Taxation and City Manager’s working group meetings
that the hosting of fulfillment centers and ancillary infrastructure pose major burdens on local communities including detrimental health and safety impacts. This acknowledgement has moved mainstream proposals such as this one away from full revenue shifts towards an equity-based, data driven approach that favors revenue
sharing. This Resolution would concretely affix this approach as Cal Cities policy.
More Data is Needed to Achieve Equity Based Approach A major challenge is the lack of adequate data to model the results of shifting in-state online sale tax revenues. Local government tax consultants and state departments
have limited data to model the effects of changes to sales tax distribution because their
information is derived only from cities that have a local transactions and use tax (TUT). Tax experts are able to model proposed tax shifts using TUTs since they are allocated on a destination basis (where a purchaser receives the product; usually a home or business). However, more than half of all cities, including some larger cities, do not
have a local TUT therefore modeling is constrained and incomplete.
Efforts to collect relevant sales tax information on the destination of products purchased online are ongoing. The most recent effort is encapsulated in SB 792 (Glazer, 2021), which would require retailers with online sales exceeding $50 million a year to report to
CDTFA the gross receipts from online sales that resulted in a product being shipped or
delivered in each city. The availability of this data would allow for a much more complete understanding of online consumer behavior and the impacts of future proposed changes to distribution. SB 792 (Glazer) is supported by Cal Cities following approval by the Revenue and Taxation Committee and board of directors.
Impact of Goods Movement Must Be Considered As noted above, city leaders and practitioners across the state acknowledge that the hosting of fulfillment centers and goods movement infrastructure pose major burdens on local communities including detrimental health, safety, and infrastructure impacts. Not
least of which is the issue of air pollution from diesel exhaust. According to California Environmental Protection Agency (Cal EPA):
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“Children and those with existing respiratory disease, particularly asthma, appear to be
especially susceptible to the harmful effects of exposure to airborne PM from diesel exhaust, resulting in increased asthma symptoms and attacks along with decreases in
lung function (McCreanor et al., 2007; Wargo, 2002). People that live or work near
heavily-traveled roadways, ports, railyards, bus yards, or trucking distribution centers
may experience a high level of exposure (US EPA, 2002; Krivoshto et al., 2008). People
that spend a significant amount of time near heavily-traveled roadways may also experience a high level of exposure. Studies of both men and women demonstrate
cardiovascular effects of diesel PM exposure, including coronary vasoconstriction and
premature death from cardiovascular disease (Krivoshto et al., 2008). A recent study of
diesel exhaust inhalation by healthy non-smoking adults found an increase in blood
pressure and other potential triggers of heart attack and stroke (Krishnan et al., 2013) Exposure to diesel PM, especially following periods of severe air pollution, can lead to
increased hospital visits and admissions due to worsening asthma and emphysema-
related symptoms (Krivoshto et al., 2008). Diesel exposure may also lead to reduced
lung function in children living in close proximity to roadways (Brunekreef et al., 1997).”
The founded health impacts of the ubiquitous presence of medium and heavy-duty
diesel trucks used to transport goods to and from fulfillment centers and warehouses
require host cities to meet increased needs of their residents including the building and maintenance of buffer zones, parks, and open space. While pollution impacts may decline with the introduction of zero-emission vehicles, wide scale adoption by large distribution fleets is still in its infancy. Furthermore, the impacts of heavy road use
necessitate increased spending on local streets and roads upgrades and maintenance.
In addition, many cities have utilized the siting of warehouses, fulfillment centers, and other heavy industrial uses for goods movements as key components of local revenue generation and economic development strategies. These communities have also foregone other land uses in favor of siting sales offices and fulfillment networks.
All said, however, it is important to acknowledge that disadvantaged communities (DACs) whether measured along poverty, health, environmental or education indices exist in cities across the state. For one example, see: California Office of Environmental Health Hazard Assessment (OEHHA) CalEnviroScreen. City officials may consider how
cities without fulfillment and warehouse center revenues are to fund efforts to combat social and economic issues, particularly in areas with low property tax and tourism-based revenues.
The Resolution aims to acknowledge these impacts broadly (this analysis does not
provide an exhaustive review of related impacts) and requests Cal Cities to account for
them in a revised distribution formula of the Bradley Burns 1% local sales tax from in-state online purchases. The Resolution does not prescribe the proportions.
Clarifying Amendments
Upon review of the Resolution, Cal Cities staff recommends technical amendments to
provide greater clarity. To review the proposed changes, please see Attachment B.
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Fiscal Impact: Significant but unknown. The Resolution on its own does not shift sales tax revenues. In anticipation and mitigation of impacts, the Resolution requests Cal Cities to utilize online
sales tax data to identify a fair and equitable distribution formula that accounts for the
broad impacts fulfillment centers involved in online retail have on the cities that host them. The Resolution does not prescribe the revenue distribution split nor does it prescribe the impacts, positive and negative, of distribution networks.
Existing Cal Cities Policy:
•Tax proceeds collected from internet sales should be allocated to the locationwhere the product is received by the purchaser.
•Support as Cal Cities policy that point of sale (situs) is where the customerreceives the product. Specific proposals in this area should be carefullyreviewed so that the impacts of any changes are fully understood.
•Revenue from new regional or state taxes or from increased sales tax rates
should be distributed in a way that reduces competition for situs-based revenue.
(Revenue from the existing sales tax rate and base, including future growth fromincreased sales or the opening of new retail centers, should continue to bereturned to the point of sale.)
•The existing situs-based sales tax under the Bradley Burns 1% baseline should
be preserved and protected.
•Restrictions should be implemented and enforced to prohibit the enactment ofagreements designed to circumvent the principle of situs-based sales and
redirect or divert sales tax revenues from other communities, when the physicallocation of the affected businesses does not change. Sales tax rebateagreements involving online retailers are inappropriate because they have theeffect of encouraging revenue to be shifted away from numerous communitiesand concentrated to the benefit of one. Any type of agreement that seeks to lure
a retailer from one community to another within a market area should also beprohibited going forward.
•Support Cal Cities working with the state California Department of Tax and FeeAdministration (CDTFA) to update the county pool allocation process to ensure
that more revenues are allocated to the jurisdiction where the purchase or first
use of a product occurs (usually where the product is delivered). Use Taxcollections from online sales, including from the South Dakota v WayfairDecision, should be shifted out of county pools and allocated to the destinationjurisdiction whose Bradley Burns tax applies and not throughout the entire
county.
Support: The following letters of concurrence were received:
Town of Apple Valley
City of El Cerrito City of La Canada Flintridge City of La Verne City of Lakewood
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City of Moorpark City of Placentia City of Sacramento
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Sales Tax Sourcing –6 –February 12, 2018
CaliforniaCityFinance.com
35
Sales Tax Sourcing – 7 – February 12, 2018
CaliforniaCityFinance.com
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Sales Tax Sourcing –8 –February 12, 2018
CaliforniaCityFinance.com
Courtesy of HdL Companies
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Sales Tax Sourcing – 9 – February 12, 2018
CaliforniaCityFinance.com
Tax Incentive Programs, Sales Tax Sharing Agreements
In recent years, especially since Proposition 13 in 1978, local discretionary (general purpose revenues) have
become more scarce. At the same time, options and procedures for increasing revenues have become more
limited. One outcome of this in many areas has been a greater competition for sales and use tax revenues.
This has brought a rise in arrangements to encourage certain land use development with rebates and
incentives which exploit California’s odd origin sales tax sourcing rules.
The typical arrangement is a sales tax sharing agreement in
which a city provides tax rebates to a company that agrees to
expand their operations in the jurisdiction of the city. Under
such an arrangement, the company generally agrees to make
a specified amount of capital investment and create a specific
number of jobs over a period of years in exchange for
specified tax breaks, often property tax abatement or some
sort of tax credit. In some cases, this has simply taken the
form of a sales office, while customers and warehouses and
the related economic activity are disbursed elsewhere in the
state. In some cases the development takes the form of
warehouses, in which the sales inventory, owned by the
company, is housed.6
Current sales tax incentive agreements in California rebate
amounts ranging from 50% to 85% of sales tax revenues back
to the corporations.
Today, experts familiar with the industry believe that
between 20% to 30% of local Bradley-Burns sales taxes paid
by California consumers is diverted from local general funds
back to corporations; over $1 billion per year.
Moving to Destination Sourcing: The Concept7
A change from origin sourcing rules to destination sourcing rules for the local tax component of California’s
sales tax would improve overall revenue collections and distribute these revenues more equitably among all
of the areas involved in these transactions.
A change from origin based sourcing to destination based sourcing would have no effect on state tax
collections. However, it would alter the allocations of local sales and use tax revenues among local agencies.
Most retail transactions including dining, motor fuel purchases, and in-store purchases would not be
affected. But in cases where the property is received by the purchaser in a different jurisdiction than where
the sales agreement was negotiated, there would be a different allocation than under the current rules.
6 See Jennifer Carr, “Origin Sourcing and Tax Incentive Programs: An Unholy Alliance” Sales Tax Notes; May 27, 2013.
7 The same issues that are of concern regarding the local sales tax do not apply to California’s Transactions and Use Taxes
(“Add-on sales taxes”) as these transactions, when not over the counter, are generally allocated to the location of use or, as in
the case of vehicles, product registration. There is no need to alter the sourcing rules for transactions and use taxes.
The Source of Origin Based Sourcing
Problems
Where other than over-the-counter sales are
concerned origin sourcing often causes a
concentration of large amounts of tax revenue in
one location, despite the fact that the economic
activity and service impacts are also occurring in
other locations.
The large amounts of revenue concentrated in a
few locations by California’s “warehouse rule”
origin sourcing causes a concentration of
revenue far in excess of the service costs
associated with the development.
In order to lure jobs and tax revenues to their
communities, some cities have entered into
rebate agreements with corporations. This has
grown to such a problem, that 20% to 30% of
total local taxes paid statewide are being rebated
back to corporations rather than funding public
services.
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Sales Tax Sourcing –12 –February 12, 2018
CaliforniaCityFinance.com
Destination Sourcing Scenario 1: Full-On
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Sales Tax Sourcing – 13 – February 12, 2018
CaliforniaCityFinance.com
Destination Sourcing Scenario 2: Split Source
mjgc
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RESOLUTION OF THE LEAGUE OF CALIFORNIA CITIES (“CAL CITIES”)
CALLING ON THE STATE LEGISLATURE TO PASS LEGISLATION THAT PROVIDES
FOR A FAIR AND EQUITABLE DISTRIBUTION OF THE BRADLEY BURNS 1% LOCAL
SALES TAX FROM IN-STATE ONLINE PURCHASES, BASED ON DATA WHERE
PRODUCTS ARE SHIPPED TO, AND THAT RIGHTFULLY TAKES INTO
CONSIDERATION THE IMPACTS THAT FULFILLMENT CENTERS HAVE ON HOST
CITIES BUT ALSO PROVIDES A FAIR SHARE TO CALIFORNIA CITIES THAT DO NOT
AND/OR CANNOT HAVE A FULFILLMENT CENTER WITHIN THEIR JURISDICTION
WHEREAS, the 2018 U.S. Supreme Court decision in Wayfair v. South Dakota clarified that states
could charge and collect tax on purchases even if the seller does not have a physical presence in the state;
and
WHEREAS, California cities and counties collect 1% in Bradley Burns sales and use tax from the
purchase of tangible personal property and rely on this revenue to provide critical public services such as
police and fire protection; and
WHEREAS, in terms of “siting” the place of sale and determining which jurisdiction receives the
1% Bradley Burns local taxes for online sales, the California Department of Tax and Fee Administration
(CDTFA) determines “out-of-state” online retailers as those with no presence in California that ship
property from outside the state and are therefore subject to use tax, not sales tax, which is collected in a
countywide pool of the jurisdiction where the property is shipped from; and
WHEREAS, for online retailers that have a presence in California and have a stock of goods in the
state from which it fulfills orders, CDTFA considers the place of sale (“situs”) as the location from which
the goods were shipped such as a fulfillment center; and
WHEREAS, in early 2021, one of the state’s largest online retailers shifted its ownership structure
so that it is now considered both an in-state and out-of-state retailer, resulting in the sales tax this retailer
generates from in-state sales now being entirely allocated to the specific city cities where the warehouse
fulfillment centers is are located as opposed to going into a countywide pools that is are shared with all
jurisdictions in those counties that County, as was done previously; and
WHEREAS, this all-or-nothing change for the allocation of in-state sales tax has created winners
and losers amongst cities as the online sales tax revenue from the retailer that was once spread amongst
all cities in countywide pools is now concentrated in select cities that host a fulfillment centers; and
WHEREAS, this has created a tremendous inequity amongst cities, in particular for cities that are
built out, do not have space for siting a 1 million square foot fulfillment centers, are not located along a
major travel corridor, or otherwise not ideally suited to host a fulfillment center; and
WHEREAS, this inequity affects cities statewide, but in particular those with specific
circumstances such as no/low property tax cities that are extremely reliant on sales tax revenue as well
as cities struggling to meet their Regional Housing Needs Allocation (RHNA) obligations that are being
compelled by the State to rezone precious commercial parcels to residential; and
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WHEREAS, the inequity produced by allocating in-state online sales tax revenue exclusively to
cities with fulfillment centers is exasperated even more by, in addition to already reducing the amount of
revenue going into the countywide pools, the cities with fulfillment centers are also receiving a larger
share of the dwindling countywide pool as it is allocated based on cities’ proportional share of sales tax
collected; and
WHEREAS, while it is important to acknowledge that those cities that have fulfillment centers
experience impacts from these activities and deserve equitable supplementary compensation, it should
also be recognized that the neighboring cities whose residents are ordering products from those that
centers now receive no Bradley Burns revenue from the center’s sales activity despite also experiencing
the impacts created by them center, such as increased traffic and air pollution; and
WHEREAS, the COVID-19 pandemic greatly accelerated the public’s shift towards online
purchases, a trend that is unlikely to be reversed to pre-pandemic levels; and
NOW, THEREFORE, BE IT RESOLVED that Cal Cities calls on the State Legislature to pass legislation
that provides for a fair and equitable distribution of the Bradley Burns 1% local sales tax from in-state
online purchases, based on data where products are shipped to, and that rightfully takes into
consideration the impacts that fulfillment centers have on host cities but also provides a fair share to
California cities that do not and/or cannot have a fulfillment center within their jurisdiction.
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2.A RESOLUTION CALLING UPON THE GOVERNOR AND THE LEGISLATURE TOPROVIDE NECCESARY FUNDING FOR CUPC TO FUFILL ITS OBLIGATION TOINSPECT RAILROAD LINES TO ENSURE THAT OPERATORS ARE REMOVINGILLEGAL DUMPING, GRAFFITI AND HOMELESS ENCAMPMENTS THAT DEGRADETHE QAULITY OF LIFE AND RESULTS IN INCREASED PUBLIC SAFETLY CONCERNSFOR COMMUNITIES AND NEIGHBORHOODS THAT ABUTT THE RAILROAD RIGHT-OF-WAY.
Source: City of South Gate Concurrence of five or more cities/city officials:Cities: City of Bell Gardens; City of Bell; City of Commerce; City of Cudahy; City of El Segundo; City of Glendora; City of Huntington Park; City of La Mirada; City of Long Beach; City of Lynwood; City of Montebello; City of Paramount; City of Pico Rivera Referred to: Housing, Community and Economic Development; and Transportation, Communications and Public Works
WHEREAS, ensuring the quality of life for communities falls upon every local government including that blight and other health impacting activities are addressed in a timely manner by private property owners within its jurisdictional boundaries for their citizens, businesses and institutions; and
WHEREAS, Railroad Operators own nearly 6,000 miles of rail right-of-way throughout
the State of California which is regulated by the Federal Railroad Administration and/or the California Public Utilities Commission for operational safety and maintenance; and
WHEREAS, the California Public Utilities Commission (CPUC) is the enforcing agency for railroad safety in the State of California and has 41 inspectors assigned throughout the entire State to inspect and enforce regulatory compliance over thousands of miles of rail line; and
WHEREAS, areas with rail line right-of-way within cities and unincorporated areas are generally located in economically disadvantaged zones and/or disadvantaged communities of color where the impact of blight further lowers property values and increases the likelihood of unsound sanitary conditions and environmental impacts upon them; and
WHEREAS, many communities are seeing an increase in illegal dumping, graffiti upon infrastructure and homeless encampments due to the lax and inadequate oversight by regulatory agencies; and
WHEREAS, local governments have no oversight or regulatory authority to require
operators to better maintain and clean their properties as it would with any other private property owner within its jurisdictional boundaries. Thus such local communities often resort to spending their local tax dollars on cleanup activities or are forced to accept the delayed and untimely
response by operators to cleaning up specific sites, and;
WHEREAS, that railroad operators should be able to provide local communities with a fixed schedule in which their property will be inspected and cleaned up on a reasonable and regular schedule or provide for a mechanism where they partner with and reimburse local governments for an agreed upon work program where the local government is enabled to remove items like illegal dumping, graffiti and encampments; and
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WHEREAS, the State has made it a priority to deal with homeless individuals and the impacts illegal encampments have upon those communities and has a budgetary surplus that
can help fund the CPUC in better dealing with this situation in both a humane manner as well a betterment to rail safety. RESOLVED, at the League of California Cities, General Assembly, assembled at the League Annual Conference on September 24, 2021, in Sacramento, that the League calls for the Governor and the Legislature to work with the League and other stakeholders to provide adequate regulatory authority and necessary funding to assist cities with these railroad right-of-way areas so as to adequately deal with illegal dumping, graffiti and homeless encampments that proliferate along the rail lines and result in public safety issues. The League will work with its member cities to educate federal and state officials to the quality of life and health impacts this challenge has upon local communities, especially those of color and/or environmental and economic hardships.
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Background Information to Resolution Source: City of South Gate Background:
The State of California has over 6,000 miles of rail lines, with significant amount running through communities that are either economically disadvantaged and/or disadvantaged communities of color. While the Federal Railroad Administration (FRA) has primary oversight of rail operations, they delegate that obligation to the State of California for lines within our State. The administration of that oversight falls under the California Public Utilities Commission (CPUC). The CPUC has only 41 inspectors covering those 6,000 miles of railroad lines in the State of California. Their primary task is ensuring equipment, bridges and rail lines are operationally safe. The right-of-way areas along the rail lines are becoming increasingly used for illegal dumping, graffiti and homeless encampments. Rail operators have admitted that they have insufficient funds set aside to clean up or sufficiently police these right-of-way areas, despite reporting a net income of over $13 billion in 2020. CPUC budget does not provide the resources to oversee whether rail operators are properly managing the right-of-way itself.
The City of South Gate has three rail lines traversing through its city limits covering about 4 miles. These lines are open and inviting to individuals to conduct illegal dumping, graffiti
buildings and structures along with inviting dozens of homeless encampments. As private property, Cities like ourselves cannot just go upon them to remove bulky items, trash, clean graffiti or remove encampments. We must call and arrange for either our staff to access the site or have the rail operator schedule a cleanup. This can take weeks to accomplish, in the meantime residents or businesses that are within a few hundred feet of the line must endure the blight and smell. Trash is often blown from the right-of-way into residential homes or into the streets. Encampments can be seen from the front doors of homes and businesses. South Gate is a proud city of hard working-class residents, yet with a median household income of just $50,246 or 65% of AMI for Los Angeles County, it does not have the financial resources to direct towards property maintenance of any commercial private property. The quality of life of
communities like ours should not be degraded by the inactions or lack of funding by others. Cities such as South Gate receive no direct revenue from the rail operators, yet we deal with environmental impacts on a daily basis, whether by emissions, illegal dumping, graffiti or
homeless encampments. The State of California has record revenues to provide CPUC with funding nor only for safety
oversight but ensuring right-of-way maintenance by operators is being managed properly. Rail Operators should be required to set aside sufficient annual funds to provide a regular cleanup of their right-of-way through the cities of California.
45
46
LETTERS OF CONCURRENCE
Resolution No. 2
47
48
49
50
July 20, 2021
Cheryl Viegas Walker
President
League of California Cities
1400 K Street, Suite 400
Sacramento, CA 95814
RE: Railroad Oversight Annual Conference Resolution
President Walker:
The City of Commerce supports the City of South Gate’s effort to submit a resolution for
consideration by the General Assembly at the League of California Cities’ (“League”) 2021 Annual
Conference in Sacramento.
The City’s resolution seeks to address a critical issue within communities, especially disadvantaged
communities of color that are home to the State’s freight rail lines. While I am supportive of the
economic base the railroad industry serves to the State, their rail lines have often become places
where illegal dumping is a constant problem and our growing homeless population call home. The
impact of these activities further erode the quality of life for our communities, increase blight,
increase unhealthy sanitation issues and negatively impact our ability to meet State water quality
standards under the MS4 permits.
As members of the League, our City values the policy development process provided to the General
Assembly. We appreciate your time on this issue. Please feel free to contact Edgar Cisneros, City
Manager, via email at ecisneros@ci.commerce.ca.us or at 323-722-4805, should you have any
questions.
Sincerely,
Mayor Leonard Mendoza
CC: Blanca Pacheco, President, Los Angeles County Division c/o
Jennifer Quan, Executive Director, Los Angeles County Division, jquan@cacities.org
CITY OF COMMERCE
2535 Commerce Way • Commerce, California 90040 • (323) 722-4805 • FAX (323) 726-6231 51
CITY OF CUDAHY CALIFORNIA
Incorporated November 10, 1960
5220 Santa Ana Street
Cudahy, California 90201
(323)773-5143
July 21, 2021
Cheryl Viegas Walker
President
League of California Cities
1400 K Street, Suite 400
Sacramento, CA 95814
RE: City of South Gate Annual Conference Resolution
Dear President Walker:
The City of Cudahy supports the City of South Gate's effort to submit a resolution for consideration by the
General Assembly at the League's 2021 Annual Conference in Sacramento.
The City of South Gate's resolution seeks to address a critical issue within communities, especially those of
economic disadvantage and disadvantage communities of color that are home to the State's freight rail lines.
While supportive of the economic base the industry serves to the State; their rail lines have often become
places where illegal dumping is a constant problem and our growing homeless population call home. These
impacts of these activities further erode the quality of life for our communities, increase blight, increase
unhealthy sanitation issues and negatively impact our ability to meet State water quality standards under the
MS4 permits.
As members of the League our city values the policy development process provided to the General Assembly.
We appreciate your time on this issue. If you have any questions, please do not hesitate to call my office at
323-773-5143.
Si re
Jose Gonzalez
Mayor
CC: Chris Jeffers, City Manager, City of South Gate
52
4'='
Office of the Mayor
July 16, 2021
Elected Officials:
Drew Boyles.
Mayor
Chrs Plmentel
Mayor Pro Tem
Caro/ Pkszkuk,
Councrl Member
Sco( Nlcol,
Council Membgr
Lance Gkoux,
Councll Member
Tracy Weaver,
Ciky Clerk
Ma[[hew Rabinson.
City Treasurer
Cheryl Viegas Walker
President
League of California Cities
1400 K Street, Suite 400
Sacramento, CA 95814
RE: City of South Gate Annual Conference Resolution
President Walker:
Appointed Officials:
The City of EI Segundo supports the Los Angeles County Division's City of South Gate's
effort to submit a resolution for consideration by the General Assembly at the League's
2021 Annual Conference in Sacramento.
Scoff Mlmick,
Crty Manager
Mark D. Hensley,
CrtyAtlorney
Department Directors:
Barbara Voss
Deputy Cffy Manager
Joseph Lllllo,
Flnance
Chrts rMnovan,
Flre Chlef
Chades Mallory,
Informakron Technology
Services
Meltssa McCollum,
Communlky Services
Rebecca Redyk,
Human Resources
Dams Cook,
Inkerlm Development Servlces
Jamre Bermudez,
{merim Police Chlef
Elras Sassoon,
Public Works
The City's resolution seeks to address a critical issue within communities, especially those
of economic disadvantage and disadvantage communities of color that are home to the
State's freight rail lines. While supportive of the economic base the industry serves to the
State, their rail lines have often become places where illegal dumping is a constant problem
and our growing homeless population call home. The impact of these activities further
erodes the quality of life for our communities, increases blight, increases unhealthy
sanitation issues, and negatively impacts our ability to meet State water quality standards
under the MS4 permits.
As members of the League, our City values the policy development process provided to the
General Assembly. We appreciate your time on this issue. Please feel free to contact El
Segundo Public Works Director Elias Sassoon at 310-524-2356, if you have any questions.
Sincerely,
Mayor of EI Segundo
www elsequndo.ora
www.elsequndobusrness.com
www.elsequndol00.orq
CC:City Council, City of EI Segundo
Blanca Pacheco, President, Los Angeles County Division c/o
Jennifer Quan, Executive Director, Los Angeles County Division, jquanpcacities.orq
Jeff Kiernan, League Regional Public Affairs Manager (via email)
350 Main Street, El Segundo, California 90245-3813
Phone (310) 524-2302 Fax (340) 322-7137
53
CITY OF GLENDORA CJTY I-IALL (020) 9'l4-8200
July 14, 2021
116 East Fool)iill 131vt, Cilendora, California 9'l741
xviiayv.ci.glenilorci.ca.us
Cheryl Viegas Walker, President
League of California Cities
1400 K Street, Suite 400
Sacramento, CA 95814
SUBJECT: SUPPORT FOR THE CITY OF SOUTH GATE'S ANNUAL
CONFERENCE RESOLUTION
Dear President Walker:
The City of Glendora is pleased to support the City of South Gate's effort to submit a resolution
for consideration by the General Assembly at the Leaguc of Califorriia Cities' 2021 Annual
Conference in Sacramento.
The City of South Gate's resolution seeks to address a critical issue that many communities, smal)
and large, are experiencing along active transportation corridors, particularly rail lines. Given the
importance and growth of the ports and logistics sector, and the economic support they provide,
we need to do more to ensure that conflicts are appropriately addresscd and mitigated to ensure
they do not become attractive nuisances. Our cities are experiencing increasing amounts of illegal
dumping (trash and debris) and the establishment of encampments by individuals cxperiencing
homelessness along roadways, highways and rail lines. Such situations create unsafe conditions -
safety, health and sanitation - that impact quality of life even as we collectively work to address
this challenge in a coordinated and responsible manner.
As members of the League of California Cities, Glendora vaiues the policy development process
provided to the General Assembly and strongly support consideration of this issue. Your attention
to this matter is greatly appreciated. Should you have any questions, please feel free to contact
Adam Raymond, City Manager, at aravi'rioml@citvoi-slendor.i.org or (626) 914-8201.
K'aren K. Davis
Mayor
C: Blanca Pacheco, President, Los Angeles County Division c/o
Jcnnifcr Quan, Executive Director, Los Angeles County Division, jquan@cacities.org
PRIDE OF THE FOOTHIt[S
54
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CITY OF LA MIRADA
DEDICATED TOSERVICE
July 19, 2021
Cheryl Viegas Walker
President
League of California Cities
1400 K Street, Suite 400
Sacramento, California 95814
L.1 kffiaJa, C alilcnua 90f;38
PO Hm )'28
La llnad:i, C alil'orm.i 911637-082:'
Phl-lnc 1-i(i2)94al-tllll F.l% i51)21')43-1-lti4
iii.xii cuyotlamuada i)Ig
SUBJECT: LETTER OF SUPPORT FOR CITY OF SOUTH GATE'S PROPOSED
RESOLUTION AT CALCITIES ANNUAL CONFERENCE
President Walker:
The City of La Mirada supports the City of South Gate's effort to submit a resolution for
consideration by the General Assembly at the League's 2021 Annual Conference in
Sacramento.
The City of South Gate's resolution seeks to address a critical issue within communities
that are home to the State's freight rail lines. While the City of La Mirada is supportive of
the economic base the railroad industry serves to the State, the rail lines have become
places where illegal dumping and a growing homeless population are significant
problems The negative impact of these illegal activities decreases the quality of life for
the La Mirada community, increases blight and unhealthy sanitation issues, and
negatively impacts the City's ability to meet State water quality standards under the MS4
permits
As members of the League, the City of La Mirada values the policy development process
provided to the General Assembly. We appreciate your consideration on this issue.
Please feel free to contact Assistant City Manager Anne Haraksin at (562) 943-0131 if
you have any questions
Sincerely,
C TY OF LA M RADA
Ed
Mayor
cc. Blanca Pacheco, President,
Jennifer Quan, Executive Director,
Los Angeles County Division c/o
Los Angeles County Division, jquan@cacities.org
Lcl Eng. Edl-i
"}l il Ijl
-\ntlioni.'.-\ Okm, DPPD
hl.ia.ui Pmi:m
Sieie L)c Ruse. L) hlin
l l1llliil memlx't
.)oluq Lcysis, Esil
let ul IILII :iienilic i
Jefl- BIIS nion
Cll' M+m.tyei56
July 22, 2021
Cheryl Viegas Walker
President
League of California Cities
1400 K Street, Suite 400
Sacramento, CA 95814
RE: Support for City of South Gate Resolution—Cleanup Activities on Rail Operator Properties
Dear President Walker,
On behalf of the City of Long Beach, I write to support the City of South Gate’s proposed resolution for
the League of California Cities’ (League) 2021 Annual Conference. This resolution seeks to direct the
League to adopt a policy urging State and federal governments to increase oversight of rail operators’
land maintenance. The City is a proponent of increased maintenance along railways and believes a
League advocacy strategy would help expedite regional responses.
The COVID-19 pandemic has exacerbated the public health and safety concerns on rail rights-of-way,
as trash, debris, and encampments have increased exponentially. These challenges erode the quality
of life for our communities, increase blight, and contribute to public health and sanitation issues. To
address these concerns, the City has engaged directly with regional partners to prioritize ongoing
maintenance and cleanups, and has invested $4 million in the Clean Long Beach Initiative as part of the
City’s Long Beach Recovery Act to advance economic recovery and public health in response to the
COVID-19 pandemic.
The City of South Gate’s proposed resolution would further advance these efforts for interjurisdictional
coordination. The increased oversight proposed by the resolution will help support better coordination
and additional resources to address illegal dumping and encampments along private rail operator
property. This is a critical measure to advance public health and uplift our most vulnerable
communities. For these reasons, the City supports the proposed League resolution.
Sincerely,
THOMAS B. MODICA
City Manager
cc: Blanca Pacheco, President, Los Angeles County Division c/o
Jennifer Quan, Executive Director, Los Angeles County Division, jquan@cacities.org
57
City oJ Lynwood!*dLYNWOODI
lncorporated 1921
11330 Bullis Road, Lyowood, CA90262
[310) 603-0220 x 200
CITY OF SOUTH GATE ANNUAL CONFERNCE RESOLUTION
luly 20,2027
Cheryl Viegas Walker
President
League of California Cities
1400 K Street, Suite 400
Sacramento, CA 95814
President Walker:
The City of Lynwood supports the City of South Gate's effort to submit a resolution for
consideration by the General Assembly at the League's 2021 Annual Conference in
Sacramento.
The City's resolution seeks to address a critical issue within communities, especially those of
economic disadvantage and disadvantage communities of color that are home to the State's
freight rail lines. While supportive of the economic base the industry serves to the State, their
rail lines have often become places where illegal dumping is a constant problem and our
growing homeless population call home. These impact of these activities further erode the
quality of life for our communities, increase blight, increase unhealthy sanitation issues and
negatively impact our ability to meet State water quality standards under the MS4 permits.
As members of the League our city values the policy development process provided to the
General Assembly. We appreciate your time on this issue. Please feel free to contact Ernie
Hernandez at (310) 603-0220 ext. 200, ifyou have any questions.
Sincerelv,
na,M yor
CC: Blanca Pacheco, President, Los Angeles County Division c/o
fennifer Quan, Executive Director, Los Angeles County Division, jquan@cacities.org
OFFICE OF TH E
MAYOR
MARISELA SANTANA
RE: City ofSouth Gate Annual Conference Resolution
I
l
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59
CITY
BRENDA OLMOS
Mayor
VILMA CUELLAR ST ALLINGS
Vice Mayor
ISABEL AGUAYO
Councilmember
Safe, Healthy, and Attractive LAURIE GUILLEN
Councilmember
PEGGY LEMONS
Councilmembet
July 19, 2021
Cheryl Viegas Walker
President
League of California Cities
1400 K Street, Suite 400
Sacramento, CA 95814
RE: SUPPORT FOR ANNUAL LEAGUE OF CITIES CONFERENCE GENERAL
ASSEMBLY RESOLUTION
President Walker:
The City of Paramount supports the City of South Gate's effort to submit a resolution for
consideration by the General Assembly at the League's 2021 Annual Conference in
Sacramento. The proposed resolution is attached
South Gate's resolution seeks to address a critical issue within communities, especially
those of economic disadvantage and disadvantage communities of color that are home
to the State's freight rail lines. While supportive of the economic boon the freight
industry serves to the State, their rail line rights of way have often become places where
illegal dumping is a constant problem and where our growing homeless populations
reside. The impact of these activities further erode the quality of life for our
communities, increase blight, increase unhealthy sanitation issues and negatively
impact our ability to meet State water quality standards under the MS4 permits.
As a member of the California League of Cities, the City of Paramount values the policy
development process provided to the General Assembly. We appreciate your time on
this issue. Please feel free to contact City Manager John Moreno at (562) 220-2222 if
you have any questions.
Dedicated to providing fiscally responsible services that maintain a vibrant community.
16400 Colorado Avenue a Paramount, CA 90723-5012 - Ph 562-220-2000 a paramountcity.com
[lfacebook.com/CityofParamountl !instagram.com/paramountpostsl C) youtube.com/CityofParamount
60
Steve Carmona
City Manager
City of Pico Rivera
OFFICE OF THE CITY MANAGER
6615 Passons Boulevard - Pico Rivera, California 90660
(562) 801-4371
Web.' yi'svw.pico-ris'era.oryq e-mail.' scastro@pico-rivertt.orq
City Council
Raul Elias
Mayor
Dr. Monica Sanchez
MayorPro Tem
Gustavo V. Camacho
Counci/member
Andrew C. Lara
Councilmember
Erik Lutz
Counci/member
CITY OF SOUTH GATE ANNUAL CONFERENCE RESOLUTION
July 14, 2021
Cheryl Viegas Walker
President
League of California Cities
1400 K Street, Suite 400
Sacramento, CA 95814
RE: City of South Gate Annual Conference Resolution
President Walker:
The City of Pico Rivera supports the City of South Gate's effort to submit a resolution for
consideration by the General Assembly at the League's 2021 Annual Conference in
Sacramento.
The City's resolution seeks to address a critical issue within communities, especially
those of economic disadvantage and disadvantaged communities of color that are home
to the State's freight rail lines. While supportive of the economic base the industry serves
to the State; their rail lines have often become places where illegal dumping is a constant
problem and our growing homeless population call home. The impact of these activities
further erodes the quality oflife for our communities, increases blight, increases unhealthy
sanitation issues, and negatively impacts our ability to meet State water quality standards
under the MS4 permits.
As members of the League, our City values the policy development process provided to
the General Assembly. We appreciate your time on this issue. Please feel free to
contact Steve Carmona at (562) 801-4405 if you have any questions.
Sincerely,
ia a l' ;, . . - % - -
City Manager
City of Pico Rivera
CC: Blanca Pacheco, President, Los Angeles County Division c/o
Jennifer Quan, Executive Director, Los Angeles County Division, jquan@cacities.org
61
League of California Cities Staff Analysis on Resolution No. 2
Staff: Damon Conklin, Legislative Affairs, Lobbyist Jason Rhine, Assistant Director, Legislative Affairs Caroline Cirrincione, Policy Analyst
Committees: Transportation, Communications, and Public Works Housing, Community, and Economic Development Summary: The City of South Gate submits this resolution, which states the League of California Cities should urge the Governor and the Legislature to provide adequate regulatory authority and necessary funding to assist cities with railroad right-of-way areas to address illegal dumping, graffiti, and homeless encampments that proliferate along the rail lines and result in public safety issues. Background:
California Public Utilities Commission (CPUC) Railroad Oversight The CPUC’s statewide railroad safety responsibilities are carried out through its Rail Safety
Division (RSD). The Railroad Operations and Safety Branch (ROSB), a unit of RSD, enforces state and federal railroad safety laws and regulations governing freight and passenger rail in California.
The ROSB protects California communities and railroad employees from unsafe practices on freight and passenger railroads by enforcing rail safety laws, rules, and regulations. The ROSB
also performs inspections to identify and mitigate risks and potential safety hazards before they create dangerous conditions. ROSB rail safety inspectors investigate rail accidents and safety-related complaints and recommend safety improvements to the CPUC, railroads, and the federal government as appropriate. Within the ROSB, the CPUC employs 41 inspectors who are federally certified in the five Federal Railroad Administration (FRA) railroad disciplines, including hazardous materials, motive power and equipment, operations, signal and train control, and track. These inspectors perform regular inspections, focused inspections, accident investigations, security inspections, and complaint investigations. In addition, the inspectors address safety risks that, while not violations of regulatory requirements, pose potential risks to public or railroad employee safety.
CPUC’s Ability to Address Homelessness on Railroads Homeless individuals and encampments have occupied many locations in California near
railroad tracks. This poses an increased safety risk to these homeless individuals of being struck by trains. Also, homeless encampments often create unsafe work environments for railroad and agency personnel.
While CPUC cannot compel homeless individuals to vacate railroad rights-of-way or create shelter for homeless individuals, it has the regulatory authority to enforce measures that can reduce some safety issues created by homeless encampments. The disposal of waste materials or other disturbances of walkways by homeless individuals can create tripping hazards in the vicinity of railroad rights-of-way. This would cause violations of Commission GO 118-A, which
sets standards for walkway surfaces alongside railroad tracks. Similarly, tents, wooden structures, and miscellaneous debris in homeless encampments can create violations of
62
Commission GO 26-D, which sets clearance standards between railroad tracks, and structures and obstructions adjacent to tracks.
Homelessness in California According to the 2020 Annual Homeless Assessment Report (AHAR) to Congress, there has been an increase in unsheltered individuals since 2019. More than half (51 percent or 113,660 people) of all unsheltered homeless people in the United States are found in California, about
four times as high as their share of the overall United States population. Many metro areas in California lack an adequate supply of affordable housing. This housing
shortage has contributed to an increase in homelessness that has spread to railroad rights-of-way. Homeless encampments along railroad right-of-way increase the incidents of illegal dumping and unauthorized access and trespassing activities. Other impacts include train
service reliability with debris strikes, near-misses, and trespasser injuries/fatalities. As of April 2021, there have been 136 deaths and 117 injuries reported by the Federal Railroad Administration over the past year. These casualties are directly associated with individuals who trespassed on the railroad. Cities across the state are expending resources reacting to service disruptions located on the railroad’s private property. It can be argued that an increase in investments and services to manage and maintain the railroad’s right-of-way will reduce incidents, thus enhancing public safety, environmental quality, and impacts on the local community.
State Budget Allocations – Homelessness The approved State Budget includes a homelessness package of $12 billion. This consists of a commitment of $1 billion per year for direct and flexible funding to cities and counties to address homelessness. While some details related to funding allocations and reporting requirements
remain unclear, Governor Newsom signed AB 140 in July, which details key budget allocations, such as:
• $2 billion in aid to counties, large cities, and Continuums of Care through the Homeless Housing, Assistance and Prevention grant program (HHAP);
• $50 million for Encampment Resolution Grants, which will help local governments resolve critical encampments and transitioning individuals into permanent housing; and
• $2.7 million in onetime funding for Caltrans Encampment Coordinators to mitigate safety risks at encampments on state property and to coordinate with local partners to connect these individuals to services and housing.
The Legislature additionally provided $2.2 billion specifically for Homekey with $1 billion available immediately. This funding will help local governments transition individuals from
Project Roomkey sites into permanent housing to minimize the number of occupants who exit into unsheltered homelessness.
With regards to this resolution, the State Budget also included $1.1 billion to clean trash and graffiti from highways, roads, and other public spaces by partnering with local governments to pick up trash and beautify downtowns, freeways, and neighborhoods across California. The program is expected to generate up to 11,000 jobs over three years. Cities Railroad Authority
A city must receive authorization from the railroad operator before addressing the impacts made by homeless encampments because of the location on the private property. Additionally, the city
63
must coordinate with the railroad company to get a flagman to oversee the safety of the work crews, social workers, and police while on the railroad tracks.
A city may elect to declare the encampment as a public nuisance area, which would allow the city to clean up the areas at the railroad company’s expense for failing to maintain the tracks
and right-of-way. Some cities are looking to increase pressure on railroad operators for not addressing the various homeless encampments, which are presenting public safety and health concerns.
Courts have looked to compel railroad companies to increase their efforts to address homeless encampments on their railroads or grant a local authority’s application for an Inspection and
Abatement Warrant, which would allow city staff to legally enter private property and abate a public nuisance or dangerous conditions.
In limited circumstances, some cities have negotiated Memoranda of Understandings (MOU) with railroad companies to provide graffiti abatement, trash, and debris removal located in the right-of-way, and clean-ups of homeless encampments. These MOUs also include local law enforcement agencies to enforce illegally parked vehicles and trespassing in the railroad’s right-of-way. MOUs also detailed shared responsibility and costs of providing security and trash clean-up. In cases where trespassing or encampments are observed, the local public works agency and law enforcement agency are notified and take the appropriate measures to remove the trespassers or provide clean-up with the railroad covering expenses outlined in the MOU.
Absent an MOU detailing shared maintenance, enforcement, and expenses, cities do not have the authority to unilaterally abate graffiti or clean-up trash on a railroad’s right-of-way.
Fiscal Impact: If the League of California Cities were to secure funding from the state for railroad clean-up
activities, cities could potentially save money in addressing these issues themselves or through an MOU, as detailed above. This funding could also save railroad operators money in addressing concerns raised by municipalities about illegal dumping, graffiti, and homeless
encampments along railroads.
Conversely, if the League of California Cities is unable to secure this funding through the Legislature or the Governor, cities may need to consider alternative methods, as detailed above, which may include significant costs.
Existing League Policy: Public Safety: Graffiti The League supports increased authority and resources devoted to cities for abatement of graffiti and other acts of public vandalism.
Transportation, Communications, and Public Works Transportation
The League supports efforts to improve the California Public Utilities Commission’s ability to respond to and investigate significant transportation accidents in a public and timely manner to improve rail shipment, railroad, aviation, marine, highway, and pipeline safety
64
Housing, Community, and Economic Development Housing for Homeless
Homelessness is a statewide problem that disproportionately impacts specific communities. The state should make funding and other resources, including enriched services, and outreach and case managers, available to help assure that local governments have the capacity to address
the needs of the homeless in their communities, including resources for regional collaborations. Homeless housing is an issue that eludes a statewide, one-size-fits-all solution, and collaboration between local jurisdictions should be encouraged. Staff Comments: Clarifying Amendments Upon review of the Resolution, Cal Cities staff recommends technical amendments to provide greater clarity. To review the proposed changes, please see Attachment A. The committee may also wish to consider clarifying language around regulatory authority and funding to assist cities with these efforts. The resolution asks that new investments from the state be sent to the CPUC to increase their role in managing and maintaining railroad rights-of-ways and potentially to cities to expand their new responsibility.
The committee may wish to specify MOUs as an existing mechanism for cities to collaborate and agree with railroad operators and the CPUC on shared responsibilities and costs.
Support: The following letters of concurrence were received:
City of Bell Gardens City of Bell City of Commerce City of Cudahy City of El Segundo City of Glendora City of La Mirada City of Paramount City of Pico Rivera City of Huntington Park City of Long Beach
City of Lynwood City of Montebello
65
2.A RESOLUTION CALLING UPON THE GOVERNOR AND THE LEGISLATURE TOPROVIDE NECCESARY NECESSARY FUNDING FOR CUPC THE CALIFORNIA PUBLICUTILITIES COMMISSION (CPUC) TO FUFILL ITS OBLIGATION TO INSPECTRAILROAD LINES TO ENSURE THAT OPERATORS ARE REMOVING ILLEGALDUMPING, GRAFFITI AND HOMELESS ENCAMPMENTS THAT DEGRADE THEQAULITY QUALITY OF LIFE AND RESULTS IN INCREASED PUBLIC SAFETLYSAFETY CONCERNS FOR COMMUNITIES AND NEIGHBORHOODS THAT ABUTT THERAILROAD RIGHT-OF-WAY.
Source: City of South Gate Concurrence of five or more cities/city officials Cities: City of Bell Gardens; City of Bell; City of Commerce; City of Cudahy; City of El Segundo; City of Glendora; City of Huntington Park; City of La Mirada; City of Long Beach; City of Lynwood; City of Montebello; City of Paramount; City of Pico Rivera Referred to: Housing, Community and Economic Development; and Transportation, Communications and Public Works
WHEREAS, ensuring the quality of life for communities falls upon every local government including that blight and other health impacting activities are addressed in a timely
manner by private property owners within its jurisdictional boundaries for their citizens, businesses and institutions; and
WHEREAS, Railroad Operators own nearly 6,000 miles of rail right-of-way throughout the State of California which is regulated by the Federal Railroad Administration and/or the California Public Utilities Commission CPUC for operational safety and maintenance; and
WHEREAS, the California Public Utilities Commission (CPUC) is the enforcing agency for railroad safety in the State of California and has 41 inspectors assigned throughout the entire State to inspect and enforce regulatory compliance over thousands of miles of rail line; and
WHEREAS, areas with rail line right-of-way within cities and unincorporated areas are generally located in economically disadvantaged zones and/or disadvantaged communities of color where the impact of blight further lowers property values and increases the likelihood of unsound sanitary conditions and environmental impacts upon them; and
WHEREAS, many communities are seeing an increase in illegal dumping, graffiti upon
infrastructure and homeless encampments due to the lax and inadequate oversight by regulatory agencies; and
WHEREAS, local governments have no oversight or regulatory authority to require operators to better maintain and clean their properties as it would with any other private property owner within its jurisdictional boundaries. Thus such local communities often resort to spending
their local tax dollars on cleanup activities or are forced to accept the delayed and untimely response by operators to cleaning up specific sites, and;
WHEREAS, that railroad operators should be able to provide local communities with a fixed schedule in which their property will be inspected and cleaned up on a reasonable and regular schedule or provide for a mechanism where they partner with and reimburse local governments for an agreed upon work program where the local government is enabled to remove items like illegal dumping, graffiti and encampments; and
ATTACHMENT A
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WHEREAS, the State has made it a priority to deal with homeless individuals and the impacts illegal encampments have upon those communities and has a budgetary surplus that
can help fund the CPUC in better dealing with this situation in both a humane manner as well as a betterment to rail safety.
RESOLVED, at the League of California Cities, General Assembly, assembled at the League Cal Cities Annual Conference on September 24, 2021, in Sacramento, that the Cal Cities League calls for the Governor and the Legislature to work with the Cal Cities League and other stakeholders to provide adequate regulatory authority and necessary funding to assist cities with these railroad right-of-way areas so as to adequately deal with illegal dumping, graffiti and homeless encampments that proliferate along the rail lines and result in public safety issues. The Cal Cities League will work with its member cities to educate federal and state officials to the quality of life and health impacts this challenge has upon local communities, especially those of color and/or environmental and economic hardships.
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